Retail time machine is looking to the future
Dundrum Town Centre stands out as a star performer for the country's retail sector but its director is determined not to get complacent about its success . By John Mulligan
The Dundrum Town Centre in south Dublin is a bit like a time machine. It's Friday, the end of January 2012 and it might as well be 2006.
As Don Nugent, the centre's director, leads a tour of the retail Shangri-La, he protests that despite being labelled recession-proof, the Dundrum centre has to work just as hard as other destinations in the face of the downturn.
There's little doubt the director and his team do slog, but who's he kidding?
In between greeting staff as he walks and assisting an elderly foreign visitor trying to find a part for his walking stick, Mr Nugent reams off some Dundrum retail records.
The recently opened Hollister shop (a US clothing brand for youngsters that's owned by Abercrombie & Fitch) was the busiest of the chain's entire global network bar the flagship outlet on New York's Fifth Avenue in terms of sales value in the week before Christmas -- and the week of the mid-term break in October.
The Tesco store is one of the busiest in the country, while the cinema has boasted the highest occupancy rate of any cinema in either Ireland or the UK. The Peter Mark hairdressers is the second busiest in the country after its Grafton Street premises. The adjacent Toni & Guy rival is that operator's busiest salon in Ireland.
The list, no doubt, goes on. And all this as the Irish Small & Medium Enterprises Association warns that many retailers are facing "armageddon".
Mr Nugent takes off his glasses again -- he's still not used to wearing them full-time and they've been pinching his nose. But maybe it's just hard to take in that Dundrum Town Centre (where 5,500 people are employed) is still doing so well in the midst of the most economically challenging era of the State's existence.
The centre's location in the depths of affluent Dublin certainly helps to keep things ticking over. Stylishly dressed and carefully coiffed mothers and their fledgling fashionista kids drift through the centre seemingly oblivious to the economic carnage that has enveloped the country.
"We are in an affluent area, but we've always been very conscious of the fact that because of the scale of the town centre that it needs a wider catchment," says Mr Nugent, a northsider who previously worked for retailers including Switzers and Dunnes Stores.
He adds that every year since the centre opened in 2005, Dundrum's marketing team has tried to broaden the town centre's potential customer base. It now targets shoppers from all over the country, as well as tourists.
"The greater the distance people travel has a direct relationship to the number of times they come and that has a direct relationship with the amount they tend to spend."
The logic being of course, that you'll splash out more if you're not going to be visiting again for another six months or a year.
Over 19.3 million visits were made to the town centre last year, beating the 19.25 million target that had been set.
That's partly why brands such as Hollister are willing to fork out for fitting out a store and then pay huge rents to be in the country's largest shopping centre. Outlets typically pay a fixed fee and a percentage of their turnover in rent.
Last year, there was consternation among some retailers when the owner of the centre -- developer Joe O'Reilly -- tried to push through rent increases of between 60pc and 100pc in some cases. Chief among those targeted for the hikes were retailers that had committed to leases long before the centre even opened in return for favourable terms.
But an independent arbitrator ruled against some of the planned rent increases, with House of Fraser and Marks & Spencer escaping the charges, and Penneys paying just slightly more. They still pay hefty annual bills though -- €3.4m, €2.5m, and €1.8m respectively. Others such as clothing operator Timberland got stung though. Its rent jumped from €245,000 to €350,000. By late last year, negotiations with other traders were still on-going.
Before these rent increases, Dundrum's annual rent roll from its 140 premises is speculated to have been €55m a year, but outsiders can't be certain what it really is. Other commentators reckon it could be substantially less.
Mr Nugent won't be drawn on the matter, however.
He says he couldn't have kept doing his job (he spends about half his time on the centre floor, meeting shop owners and managers) if he'd also had to engage in rent discussions.
"I did not want to be part of the rent negotiation process," he points out.
"I can't have that conversation with a tenant one day about what we're doing for them on the marketing front, and the next day be having a problem over rent. Of course I'm aware what's going on, but I'm not involved directly in the process and that's deliberately by choice."
He also says that the fact loans attached to the centre are now controlled by the National Asset Management Agency (NAMA), doesn't deflect him from the day job.
Dundrum Town Centre is certainly one of the single most valuable assets in NAMA's extensive portfolio (very broadly estimated to be worth anywhere between €250m and over €500m), with Joe O'Reilly's loans having been among the first to be transferred to the toxic agency.
He was also among the 'golden circle' who borrowed money from Anglo Irish Bank to buy shares in the institution.
So does NAMA's influence pervade the centre?
"No. It is an asset that's performing," says a coy Mr Nugent. "Whether it's for that reason or whatever reason, we've been left to run the business."
He says he met NAMA officials "in the early stages", but only to present an overview of Dundrum, although there's more regular contact between financial boffins on both sides.
Meanwhile, and in spite of the generally brutal retail scene, traders still flock to Dundrum.
There's even a waiting list of clients wanting to snap up store space.
A massive extension that would more than double the size of the complex has been granted already, but Mr Nugent concedes it won't go ahead for a number of years.
Even so, some existing retailers occasionally bring up the subject, expressing an interest in taking space in it when it's eventually built.
But just what on earth do international retailers especially make of this apparent blip on the Irish retail landscape?
They must think talk of austerity measures, bailouts and bank busts has been drastically overdone. "I don't think the media has done the retail business any particular favours," claims Mr Nugent. "There's been a lot of negative press about the economy, some of it justified and some of it not."
He adds that some commentators -- including those in the industry -- have been just short of hanging a banner across the east coast warning off international retailers.
"The reality is that if you take all the international brands, Ireland probably has no more than about 30pc or 40pc of them. There's a lot more scope for brands to come into Ireland."
But even if they come, will people have money in their pockets to spend?
Mr Nugent thinks so.
"As people begin to sort out their credit card debts and the overdrafts, there will be a slow, but deliberate loosening of the purse strings. That's not to say we're cracking the champagne open yet."
He says there's been a good early response to new spring stock, for example.
"It's always a good indication from our point of view. The stores that brought in spring stock a bit earlier have done better in January than others."
But of course, one rose does not a summer make.
"I would be cautiously optimistic that we will begin to see positive steps in the fourth quarter of this year. We'll see some single-digit growth."
Retailers around the country will be hoping he's right.